IAS 23 — Capitalisation of borrowing costs and first-time adoption

Date recorded:

The Committee discussed a request to clarify the interaction of IAS 23 Borrowing Costs and IFRS 1 First-time Adoption of International Financial Reporting Standards with respect to the borrowing costs that were capitalised in accordance with previous GAAP (when the previous GAAP was inconsistent with the IFRSs). The issue results from the revision of IAS 23 effective from 1 January 2009 that removed the option of expensing borrowing costs.

After a brief discussion the Committee decided to propose a clarification of IAS 23 that would allow grandfathering of the borrowing costs capitalised in accordance with the previous GAAP in the opening statement of financial position prepared in accordance with the IFRSs. The Committee also proposed to clarify the transition requirement for first time adopters and suggested that requirements IAS 23 should be applied after transition, regardless of the date capitalisation started.

Some Committee members suggested that first-time adopters should apply the requirements of their previous national GAAP also after transition when they started capitalisation before the date of transition. This proposal did not receive significant support as the Committee was concerned about comparability and consistency of the first IFRS financial statements.

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